Won't subscribe to NMDC FPO: Sandeep Madan

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Won't subscribe to NMDC FPO: Sandeep Madan

The follow-on public offer of NMDC opened for subscriptions today. In an exclusive interview with CNBC-TV18, Sandeep Madan, High Networth Individual, speaks about the issue and gives his outlook going forward.

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The follow-on public offer of NMDC opened for subscriptions today. The offer comprises a net offer to the public of 330,500,000 equity shares of face value Re 1 each and a reservation of 1,743,200 equity shares for purchase by eligible employees. The offer will close on March 12, 2010. The price band for the issue is fixed at Rs 300-350 per share.

In an exclusive interview with CNBC-TV18, Sandeep Madan, High Networth Individual, speaks about the issue and gives his outlook going forward.

Here is a verbatim transcript of the exclusive interview with Sandeep Madan on CNBC-TV18. Also watch the accompanying video.

Q: Is National Mineral Development Corporation (NMDC) a subscribe or a skip?

A: Basically, it is a skip for now, not because of NMDC itself, but because of the way the government has been pricing its issues, FPOs in the recent past. When promoters do this kind of stuff and have a high pricing on their side, it is understandable, these are group of individuals who want to get the best out of what they have created over a period of time. But government doing that, very clear examples for that is National Thermal Power Corporation , Rural Electrification Corporation (REC) trying to get the last dollar or last penny on the table for that matter, that is a bit surprising. In this case too my concern is the same that the pricing on this has been on the higher side, especially if it gets subscribed at the upper end to the band.

Q: Do you think there is any percentage in looking at it at Rs 300, the lower end of the band? Do you think that may work out for HNIs or you are not convinced even with Rs 300?

A: Rs 300 too in my mind is a price which is on the higher side based on all the parameters that one has there to analyse. But the fact of the matter remains that there has been no clear price determination on this stock for all this while because of the low liquidity with which it has been floating. So today the price that we are talking is the price that has been announced is times higher than the international peers and what one needs to see is that it is an international global market now. So if for any reason iron ore can be brought in from anywhere in the world at a cheaper price, I don't understand why is something that is mined in India has to get a certain price for the valuation to justify itself.

The argument of growth being in this country is a very fair one. We see that this country is going to grow on a very different scale vis-à-vis the rest of the world. So in that given situation Japan, China, India, the growth story remains. The commodities would be required in plenty, steel would be required based on steel requirements iron ore prices should strengthen. If they do obviously the price going forward should improve from what it is today. Also the stock prices will benefit from that, but then saying that each international company would have the same advantage because now with the global world, this being a global place where trading can be done seamlessly, I don't understand why something being produced in India, except for the freight part, would make any difference other than that.